SENATE AMENDED

 

PRIOR PRINTER'S NOS. 1461, 2050

PRINTER'S NO.  2975

  

THE GENERAL ASSEMBLY OF PENNSYLVANIA

  

HOUSE BILL

 

No.

1294

Session of

2011

  

  

INTRODUCED BY GODSHALL, PRESTON, AUMENT, BEAR, BRENNAN, BUXTON, CARROLL, CLYMER, D. COSTA, P. COSTA, CUTLER, DALEY, DAVIDSON, DELOZIER, ELLIS, GRELL, GROVE, HARHART, W. KELLER, KORTZ, KOTIK, MANN, McGEEHAN, MILLARD, NEUMAN, D. O'BRIEN, M. O'BRIEN, PAYNE, PAYTON, PEIFER, PERRY, PYLE, QUIGLEY, READSHAW, REICHLEY, SAINATO, SAYLOR, SCAVELLO, SONNEY, VULAKOVICH, WILLIAMS, KULA, MILLER, GINGRICH, STEPHENS, DEASY, GIBBONS, M. SMITH, GERGELY, CHRISTIANA, KILLION, BRIGGS, STABACK, WAGNER, OBERLANDER, SABATINA, HENNESSEY, LONGIETTI AND EVERETT, APRIL 6, 2011

  

  

SENATOR TOMLINSON, CONSUMER PROTECTION AND PROFESSIONAL LICENSURE, AS AMENDED, JANUARY 18, 2012   

  

  

  

AN ACT

  

1

Amending Title 66 (Public Utilities) of the Pennsylvania

<--

2

Consolidated Statutes, further providing for valuation of and

3

return on the property of a public utility; and providing for

4

alternative regulatory mechanisms.

5

Amending Title 66 (Public Utilities) of the Pennsylvania

<--

6

Consolidated Statutes, further providing for Law Bureau,

7

other bureaus, offices and positions, for the burden of

8

proof, for the recovery of the costs of distribution system

9

improvement projects and for civil penalties for violations.

10

The General Assembly of the Commonwealth of Pennsylvania

11

hereby enacts as follows:

12

Section 1.  Section 1311(c) of Title 66 of the Pennsylvania

<--

13

Consolidated Statutes is amended and the section is amended by

14

adding a subsection to read:

15

§ 1311.  Valuation of and return on the property of a public

16

utility.

 


1

* * *

2

(c)  Segregation of property.--When any public utility

3

furnishes more than one of the different types of utility

4

service, the commission shall segregate the property used and

5

useful in furnishing each type of such service, and shall not

6

consider the property of such public utility as a unit in

7

determining the value of the rate base of such public utility

8

for the purpose of fixing rates. A utility that provides water

9

and wastewater service shall be exempt from this subsection and

10

may combine all components of its water and wastewater revenue

11

requirement for the purposes of fixing rates on a consolidated

12

basis.

13

* * *

14

(e)  Definition.--As used in this section, the term "utility

15

that provides both water and wastewater service" shall include

16

subsidiary companies that individually provide water or

17

wastewater service so long as the companies are wholly owned by

18

a common parent company.

19

Section 2.  Title 66 is amended by adding a section to read:

20

§ 1329.  Alternative regulatory mechanisms.

21

(a)  Declaration of policy.--Many fixed utilities and city

22

natural gas distribution operations in this Commonwealth have

23

incurred and will continue to incur significant costs to

24

maintain, enhance  or modernize their physical facilities in

25

order to continue to provide customers with safe and reliable

26

service. Under traditional regulatory mechanisms developed under

27

this title, these utilities and distribution operations

28

experience delay in the recovery of the revenue requirements

29

associated with those costs. The opportunity for more timely

30

recovery of those costs, including the recovery of capital

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1

costs, including return of and on capital investments, and,

2

where applicable, debt service and debt-service coverage, should

3

encourage investment to replace facilities for continued

4

reliability, should enhance the efficiency of the construction

5

cycle and should attract lower-cost debt, which would reduce the

6

overall cost of these investments and should create jobs in the

7

Commonwealth. Accordingly, it is in the public interest to

8

provide for alternative regulatory mechanisms as set forth under

9

this section.

10

(b)  Authority.--

11

(1)  Notwithstanding any other provision of this title 

12

that would prohibit implementation of this section, upon

13

petition by a fixed utility or a city natural gas

14

distribution operation, filed in its sole discretion, the

15

commission shall have the authority to approve,  modify or

16

reject additional regulatory procedures and mechanisms

17

proposed by a fixed utility or a city natural gas

18

distribution operation to provide for timely recovery of

19

reasonable and  prudent costs incurred for the improvement of

20

physical facilities to maintain safety or reliability.

21

(2)  (i)  The additional procedures and mechanisms under

22

paragraph (1) shall include, but are not limited to:

23

(A)  The use of a fully projected future test

24

year in a general rate proceeding under section

25

1308(d).

26

(B)  An automatic adjustment clause to recover

27

capital costs and  incremental expenditures accounted

28

for as expense of certain projects, as approved by

29

the commission under this section that are placed

30

into service between base rate proceedings.

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1

(ii)  For purposes of this paragraph, a fully

2

projected future test year shall be the 12-month period

3

beginning with the first month that the new rates could

4

be placed in effect after application of the full

5

suspension period permitted under section 1308(d).

6

(c)  Construction and interpretation.--Except as otherwise

7

expressly provided under this section, nothing under this

8

section shall be construed as limiting the existing ratemaking

9

authority of the commission, including, but not limited to, the

10

commission's existing authority to permit recovery of operating

11

expenses through an automatic adjustment clause, or as

12

indicating that the existing authority of the commission over

13

rate structure or design is limited.

14

(d)  Commission.--The commission, by regulation or order,

15

shall prescribe the specific procedures to be followed in

16

establishing the alternative regulatory procedures and

17

mechanisms authorized in this section. An alternative regulatory

18

mechanism approved by the commission under this section shall:

19

(1)  Provide for reasonable allocation of costs to the

20

customer class responsible for those costs.

21

(2)  Provide for adjustment of the mechanism, including a

22

process to provide:

23

(i)  Credit to customer accounts for over collections

24

and collections for ineligible projects.

25

(ii)  Charges to customer accounts for under

26

collections.

27

(3)  Provide for a cap on the amount that may be

28

collected from customers through an alternative regulatory

29

mechanism authorized by subsection (b)(2)(i)(B).

30

Section 3.  This act shall take effect in 60 days.

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1

Section 1.  Sections 308(b), 308.2(a)(11) and 315(e) of Title

<--

2

66 of the Pennsylvania Consolidated Statutes are amended to

3

read:

4

§ 308.  Bureaus and offices.

5

* * *

6

(b)  Law Bureau.--The Law Bureau shall be a multifunction

7

legal staff, consisting of a prosecutory function, an advisory

8

function, a representational function and an enforcement

9

function. The Director of the Law Bureau shall be the chief

10

counsel of the commission and shall serve at the pleasure of the

11

commission. The commission may also, from time to time, appoint

12

such assistant counsel to the commission as may be required for

13

the proper conduct of the work of the Law Bureau. Assistant

14

counsel may be removed by the commission only for good cause.

15

The Law Bureau shall advise the commission on any and all

16

matters. No counsel shall in the same case or a factually

17

related case perform duties in the prosecutory and advisory

18

functions, if such performance would represent a conflict of

19

interest. Except for litigation referred to the Attorney General

20

or other appropriate outside counsel, the Law Bureau solely

21

shall be responsible to represent the commission upon appeals

22

and other hearings in the courts of common pleas and in the

23

Commonwealth Court, Supreme Court or other courts of this

24

Commonwealth or in any Federal court or agency and in actions

25

instituted to recover penalties and to enforce regulations and

26

orders of the commission. If necessary to protect the public

27

interest, the Law Bureau, pursuant to its prosecutorial

28

function, may initiate and participate in proceedings before the

29

commission [unless directed by the commission to do so in a

30

proceeding involving transportation, safety, eminent domain,

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1

siting, service issues having no impact on rates or ability to

2

pay or assist the Office of Trial Staff in carrying out the

3

duties of the Office of Trial Staff, nor shall any member of the

4

Law Bureau receive assistance from the Office of Trial Staff in

5

the performance of his duties. Except as provided in this

6

section, the Law Bureau may receive assistance from any other

7

bureau or office of the commission as determined to be

8

necessary].

9

* * *

10

§ 308.2.  Other bureaus, offices and positions.

11

(a)  Establishment of other bureaus, offices and positions.--

12

In addition to the specific bureaus established in this part,

13

the commission may establish other bureaus, offices and

14

positions to perform the following functions:

15

* * *

16

(11)  Take appropriate enforcement actions, including

17

rate proceedings, service proceedings and [allocation]

18

application proceedings, necessary to insure compliance with

19

this title, commission regulations and orders.

20

* * *

21

§ 315.  Burden of proof.

22

* * *

23

(e)  Use of future test year.--In discharging its burden of

24

proof the utility may utilize a future test year or a fully

25

projected future test year, which shall be the 12-month period

26

beginning with the first month that the new rates will be placed

27

in effect after application of the full suspension period

28

permitted under section 1308(d) (relating to voluntary changes

29

in rates). The commission shall promptly adopt rules and

30

regulations regarding the information and data to be submitted

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1

when and if a future test period or a fully projected future

2

test year is to be utilized. Whenever a utility utilizes a

3

future test year or a fully projected future test year in any

4

rate proceeding and such future test year or a fully projected

5

test year forms a substantive basis for the final rate

6

determination of the commission, the utility shall provide, as

7

specified by the commission in its final order, appropriate data

8

evidencing the accuracy of the estimates contained in the future

9

test year or a fully projected future test year, and the

10

commission may after reasonable notice and hearing, in its

11

discretion, adjust the utility's rates on the basis of such

12

data.

13

Section 2.  The heading of Chapter 13 of Title 66 is amended

14

and the chapter is amended by adding a subchapter heading to

15

read:

16

CHAPTER 13 

17

RATES AND [RATE MAKING] DISTRIBUTION SYSTEMS

18

SUBCHAPTER A

19

RATES

20

Section 3.  Section 1307(g) of Title 66 is repealed:

21

§ 1307.  Sliding scale of rates; adjustments.

22

* * *

23

[(g)  Recovery of costs related to distribution system

24

improvement projects designed to enhance water quality, fire

25

protection reliability and long-term system viability.--Water

26

utilities may file tariffs establishing a sliding scale of rates

27

or other method for the automatic adjustment of the rates of the

28

water utility as shall provide for recovery of the fixed costs

29

(depreciation and pretax return) of certain distribution system

30

improvement projects, as approved by the commission, that are

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1

completed and placed in service between base rate proceedings.

2

The commission, by regulation or order, shall prescribe the

3

specific procedures to be followed in establishing the sliding

4

scale or other automatic adjustment method.]

5

* * *

6

Section 4.  Section 1311(c) of Title 66 is amended and the

7

section is amended by adding a subsection to read:

8

§ 1311.  Valuation of and return on the property of a public

9

utility.

10

* * *

11

(c)  Segregation of property.--When any public utility

12

furnishes more than one of the different types of utility

13

service, the commission shall segregate the property used and

14

useful in furnishing each type of such service, and shall not

15

consider the property of such public utility as a unit in

16

determining the value of the rate base of such public utility

17

for the purpose of fixing base rates. A utility that provides

18

water and wastewater service shall be exempt from this

19

subsection upon petition of a utility to combine water and

20

wastewater revenue requirements. The commission when setting

21

base rates, after notice and an opportunity to be heard, may

22

allocate a portion of the wastewater revenue requirement to the

23

combined water and wastewater customer base if in the public

24

interest.

25

* * *

26

(e)  Definition.--As used in this section, the term "utility

27

that provides both water and wastewater service" shall include a

28

subsidiary company that individually provides water or

29

wastewater service if the company is wholly owned by a common

30

parent company.

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1

Section 5.  Section 1327(b) introductory paragraph of Title

2

66 is amended to read:

3

§ 1327.  Acquisition of water and sewer utilities.

4

* * *

5

(b)  Procedure.--The commission, upon application by a public

6

utility, person or corporation which has agreed to acquire

7

property from another public utility, municipal corporation or

8

person, may approve an inclusion in rate base in accordance with

9

subsection (a) prior to the acquisition and prior to a

10

proceeding under this [chapter] subchapter to determine just and

11

reasonable rates if:

12

* * *

13

Section 6.  Chapter 13 of Title 66 is amended by adding a

14

subchapter to read:

15

SUBCHAPTER B

16

DISTRIBUTION SYSTEMS

17

Sec.

18

1350.  Scope of subchapter.

19

1351.  Definitions.

20

1352.  Long-term infrastructure improvement plan.

21

1353.  Distribution system improvement charge.

22

1354.  Customer notice.

23

1355.  Review.

24

1356.  Asset optimization plans.

25

1357.  Computation of charge.

26

1358.  Customer protections.

27

1359.  Projects.

28

1360.  Applicability.

29

§ 1350.  Scope of subchapter.

30

This subchapter shall provide an additional mechanism for a

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1

distribution system to recover costs related to the repair,

2

improvement and replacement of eligible property.

3

§ 1351.  Definitions.

4

The following words and phrases when used in this subchapter

5

shall have the meanings given to them in this section unless the

6

context clearly indicates otherwise:

7

"Capitalized cost."  Costs permitted to be capitalized

8

pursuant to the Uniform System of Accounts and Generally

9

Accepted Accounting Principles.

10

"Distribution system."  A system owned or operated by a

11

utility. The term includes a natural gas distribution company, a

12

city natural gas distribution operation, an electric

13

distribution company, a water utility and a collection system

14

for a wastewater utility.

15

"Distribution system improvement charge."  A charge imposed

16

by a utility to recover the reasonable and prudent costs

17

incurred to repair, improve or replace eligible property that is

18

part of the utility's distribution system.

19

"Eligible property."  Property that is part of a distribution

20

system and eligible for repair, improvement and replacement of

21

existing infrastructure under this subchapter. Included property

22

shall be as follows:

23

(1)  For electric distribution companies, eligible

24

property shall include:

25

(i)  Poles and towers.

26

(ii)  Overhead and underground conductors.

27

(iii)  Transformers and substation equipment.

28

(iv)  Any fixture or device related to eligible

29

property under subparagraphs (i), (ii) and (iii),

30

including insulators, circuit breakers, fuses, reclosers,

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1

grounding wires, crossarms and brackets, relays,

2

capacitors, converters and condensers.

3

(v)  Unreimbursed funds related to highway relocation

4

projects where an electric distribution company must

5

relocate its facilities.

6

(vi)  Other related capitalized costs.

7

(2)  For natural gas distribution companies and city

8

natural gas distribution operations, eligible property shall

9

include:

10

(i)  Piping.

11

(ii)  Couplings.

12

(iii)  Gas services lines and insulated and

13

noninsulated fittings.

14

(iv)  Valves.

15

(v)  Excess flow valves.

16

(vi)  Risers.

17

(vii)  Meter bars.

18

(viii)  Meters.

19

(ix)  Unreimbursed funds related to highway

20

relocation projects where a natural gas distribution

21

company or city natural gas distribution operation must

22

relocate its facilities.

23

(x)  Other related capitalized costs.

24

(3)  For water utilities, eligible property shall

25

include:

26

(i)  Utility service lines, meters and hydrants

27

installed as in-kind replacements for customers.

28

(ii)  Mains and valves installed as replacements for

29

existing facilities that have worn out, are in

30

deteriorated condition or are required to be upgraded to

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1

meet under 52 Pa. Code Ch. 65 (relating to water

2

service).

3

(iii)  Main extensions installed to eliminate dead

4

ends and to implement solutions to regional water supply

5

problems that present a significant health and safety

6

concern for customers currently receiving service from

7

the water utility.

8

(iv)  Main cleaning and relining projects.

9

(v)  Unreimbursed funds related to highway relocation

10

projects where a water utility must relocate its

11

facilities.

12

(vi)  Other related capitalized costs.

13

(4)  For wastewater utilities, eligible property shall

14

include:

15

(i)  Collection sewers, collecting mains and service

16

laterals, including sewer taps, curbstops and lateral

17

cleanouts installed as in-kind replacements for

18

customers.

19

(ii)  Collection mains and valves for gravity and

20

pressure systems and related facilities such as manholes,

21

air and vacuum release chambers, cleanouts, main line

22

flow meters, valve vaults and lift stations installed as

23

replacements or upgrades for existing facilities that

24

have worn out, are in deteriorated condition or are

25

required to be upgraded by law, regulation or order.

26

(iii)  Collection main extensions installed to

27

implement solutions to wastewater problems that present a

28

significant health and safety concern for customers

29

currently receiving service from the wastewater utility.

30

(iv)  Collection main rehabilitation including inflow

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1

and infiltration projects.

2

(v)  Unreimbursed funds related to highway relocation

3

projects where a wastewater utility must relocate its

4

facilities.

5

(vi)  Other related capitalized costs.

6

"Utility."  A natural gas distribution company, electric

7

distribution company, water or wastewater utility or city

8

natural gas distribution operation.

9

§ 1352.  Long-term infrastructure improvement plan.

10

(a)  Submission.--In order to be eligible to recover costs

11

under section 1353 (relating to distribution system improvement

12

charge), a utility must submit a long-term infrastructure

13

improvement plan. The plan shall include the following:

14

(1)  Identification of the types and age of eligible

15

property owned or operated by the utility for which the

16

utility would seek recovery under this subchapter.

17

(2)  A schedule for the repair and replacement of

18

eligible property.

19

(3)  A general description of the location of the

20

eligible property.

21

(4)  A reasonable estimate of the quantity of eligible

22

property to be improved.

23

(5)  Projected annual expenditures to implement the plan

24

and measures taken to ensure that the plan is cost effective.

25

(6)  The manner in which the replacement of aging

26

infrastructure will be accelerated and how the repair and

27

replacement will ensure and maintain adequate, efficient,

28

safe, reliable and reasonable service.

29

(7)  If the plan is not adequate and sufficient to ensure

30

and maintain adequate, efficient, safe, reliable and

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1

reasonable service, the commission shall order a new or

2

revised plan.

3

(b)  Periodic review.--

4

(1)  The commission shall promulgate regulations for the

5

periodic review at least once every five years of long-term

6

infrastructure plans. The regulations may authorize a utility

7

to revise, update or resubmit a plan as appropriate.

8

(2)  The regulations shall ensure that a distribution

9

system improvement charge shall terminate if the commission

10

determines that the utility is not in compliance with the

11

approved plan.

12

§ 1353.  Distribution system improvement charge.

13

(a)  Authority.--Except as provided under this subchapter,

14

after January 1, 2013, a utility may petition the commission

15

for, or the commission, after notice and hearing, may approve

16

the establishment of a distribution system improvement charge to

17

provide for the timely recovery of the reasonable and prudent

18

costs incurred to repair, improve or replace eligible property

19

in order to ensure and maintain adequate, efficient, safe,

20

reliable and reasonable service.

21

(b)  Petition.--A petition for commission approval of a

22

distribution system improvement charge shall include the

23

following:

24

(1)  An initial tariff that complies with a model tariff

25

adopted by the commission. The proposed tariff shall include

26

the following:

27

(i)  A description of the eligible property.

28

(ii)  The effective date of the distribution system

29

improvement charge.

30

(iii)  Computation of the distribution system

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1

improvement charge.

2

(iv)  The method by which the utility will provide

3

quarterly updates of the distribution improvement charge.

4

(v)  A description of consumer protections.

5

(2)  Testimony, affidavits, exhibits or other evidence

6

that demonstrates that a distribution improvement system

7

charge is in the public interest and will facilitate utility

8

compliance with the following:

9

(i)  The provision and maintenance of adequate,

10

efficient, safe, reliable and reasonable service

11

consistent with section 1501 (relating to character of

12

service and facilities).

13

(ii)  Commission regulations and orders relating to

14

the provision and maintenance of adequate, efficient,

15

safe, reliable and reasonable service.

16

(iii)  Any other requirement under Federal or State

17

law relating to the provision and maintenance of

18

adequate, efficient, safe, reliable and reasonable

19

service.

20

(3)  A long-term infrastructure improvement plan under

21

section 1352 (relating to long-term infrastructure

22

improvement plan).

23

(4)  Certification that a base rate case has been filed

24

within the last five years under section 1308(d) (relating to

25

voluntary changes in rates).

26

(5)  If a base rate case has not been filed within five

27

years prior to the effective date of this section, the

28

utility must file a base rate case in order to be eligible

29

for a distribution system improvement charge.

30

(6)  Any other information required by the commission.

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1

§ 1354.  Customer notice.

2

Utilities shall provide notice to customers in bill inserts

3

of the following:

4

(1)  Submission of the proposed distribution system

5

improvement charge and initial tariff.

6

(2)  Notice of the commission's disposition of the

7

submission under paragraph (1).

8

(3)  Any changes that occur as a result of quarterly

9

adjustments.

10

(4)  Any other information required by the commission.

11

§ 1355.  Review.

12

Following the filing of a petition in compliance with section

13

1353 (relating to distribution system improvement charge), the

14

commission shall, after notice and opportunity to be heard,

15

approve, modify or reject the distribution system improvement

16

charge and initial tariff. The commission shall hold evidentiary

17

and public input hearings as necessary to review the petition.

18

§ 1356.  Asset optimization plans.

19

A utility with an approved distribution system charge and

20

long-term infrastructure plan shall file annual asset

21

optimization plans. The plan shall include the following:

22

(1)  A description that specifies all eligible property

23

repaired, improved and replaced in the immediately preceding

24

12-month period pursuant to the utility's long-term

25

infrastructure improvement plan and prior year's asset

26

optimization plan.

27

(2)  A detailed description of all the facilities to be

28

improved in the upcoming 12-month period.

29

§ 1357.  Computation of charge.

30

(a)  Recovery.--The following shall apply:

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1

(1)  The initial distribution system improvement charge

2

shall be calculated to recover the fixed cost of eligible

3

property that has:

4

(i)  Not previously been reflected in the utility's

5

rate base.

6

(ii)  Been placed in service during the three-month

7

period ending one month prior to the effective date of

8

the distribution improvement system charge.

9

(2)  After calculation of the initial charge under

10

paragraph (1), the distribution system improvement charge 

11

must be updated on a quarterly basis to reflect eligible

12

property placed in service during the three-month period

13

ending one month prior to the effective date of each

14

distribution system improvement charge update.

15

(3)  The fixed cost of eligible property shall consist of

16

depreciation and pretax return, except as provided for in

17

subsection (c) for city natural gas distribution operation.

18

(b)  Depreciation calculation.--Depreciation shall be

19

calculated by applying the original cost of the eligible

20

property to the annual accrual rates employed in the utility's

21

last base rate case for the plant accounts in which each

22

retirement unit of distribution system improvement charge 

23

eligible property is recorded. The following shall apply:

24

(1)  The pretax return shall be calculated using the

25

Federal and State income tax rates, the utility's actual

26

capital structure and actual cost rates for long-term debt

27

and preferred stock as of the last day of the three-month

28

period ending one month prior to the effective date of the

29

distribution system or collection system improvement charge

30

and subsequent updates.

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1

(2)  The cost of equity shall be the equity return rate

2

approved in the utility's last fully litigated base rate

3

proceeding for which a final order was entered not more than

4

two years prior to the effective date of the distribution

5

system or collection system improvement charge.

6

(3)  If more than two years have elapsed between the

7

entry of a final order and the effective date of the

8

distribution system improvement charge, the equity return

9

rate used in the calculation shall be the equity return rate

10

calculated by the commission in the latest Quarterly Report

11

on the Earnings of Jurisdictional Utilities released by the

12

commission.

13

(c)  Recovery of costs.--Utilities may file tariffs

14

establishing a sliding scale of rates or other method for the

15

automatic adjustment of the rates of the utility to provide for

16

recovery of the depreciation and pretax return fixed costs of

17

eligible property, as approved by the commission, that are

18

completed and placed in service between base rate proceedings.

19

For city natural gas distribution operations, recoverable costs

20

shall be amounts reasonably expended or incurred to purchase and

21

install recovery eligible property and associated financing

22

costs, if any, including debt service, debt service coverage and

23

issuance costs.

24

(d)  Calculation.--

25

(1)  The distribution system improvement charge shall be

26

expressed as a percentage carried to two decimal places and

27

shall be applied in a manner consistent with section 1358

28

(relating to customer protections) to each customer under the

29

utility's applicable rates and charges. The charge shall not

30

be applied to amounts billed for public fire protection

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1

service by water utilities and the State tax adjustment

2

surcharge.

3

(2)  The distribution system improvement charge shall be

4

calculated by dividing one-fourth of the annual fixed costs

5

associated with all eligible property under the distribution

6

system improvement charge by the projected revenue for the

7

quarterly period during which the distribution system will be

8

collected. The projected revenues shall not include revenues

9

from public fire protection service earned by water utilities

10

and the State tax adjustment surcharge.

11

(3)  Supporting data for each quarterly update shall be

12

filed with the commission and served upon the commission, the

13

Office of Consumer Advocate and the Office of Small Business

14

Advocate at least ten days prior to the effective date of the

15

update.

16

§ 1358.  Customer protections.

17

(a)  Limitation.--As follows:

18

(1)  Except as provided under paragraph (2), the

19

distribution system improvement charge may not exceed 5% of

20

the amount billed to customers under the applicable rates of

21

the wastewater utility or distribution rates of the electric

22

distribution company, natural gas distribution company or

23

city natural gas distribution operation. The commission may

24

upon petition grant a waiver of the 5% limit under this

25

paragraph for a utility in order to ensure and maintain

26

adequate, efficient, safe, reliable and reasonable service.

27

(2)  A distribution system improvement charge granted to

28

a water utility under former section 1307(g) (relating to

29

sliding scale of rates; adjustments) or this subchapter may

30

not exceed 7.5% of the amount billed to customers. All

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1

proceedings, orders and other actions of the commission

2

related to a distribution system improvement charge granted

3

to a water utility prior to the effective date of this

4

paragraph shall remain in effect unless specifically amended

5

or revoked by the commission.

6

(b)  Charge reset.--

7

(1)  The distribution system shall be reset at zero as of

8

the effective date of new base rates that provide for

9

prospective recovery of the annual costs previously recovered

10

under the distribution system or improvement charge.

11

(2)  After the reset date under paragraph (1), only the

12

fixed costs of new eligible property that have not previously

13

been reflected in the utility's rate base shall be reflected

14

in the quarterly updates of the distribution system

15

improvement charge.

16

(3)  The distribution system improvement charge shall be

17

reset at zero if, in any quarter, data filed with the

18

commission in the utility's most recent annual or quarterly

19

earnings report show that the utility will earn a rate of

20

return that would exceed the allowable rate of return used to

21

calculate its fixed costs under the distribution system

22

improvement charge.

23

(c)  Construction.--Except as otherwise expressly provided

24

under this subchapter, nothing under this subchapter shall be

25

construed as limiting the existing ratemaking authority of the

26

commission, including the authority to permit recovery of

27

operating expenses through an automatic adjustment clause, or as

28

indicating that the existing authority of the commission over

29

rate structure or design is limited.

30

(d)  Commission.--The commission, by regulation or order,

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1

shall prescribe the specific procedures to be followed to

2

approve a distribution system improvement charge. A distribution

3

system improvement charge approved by the commission shall

4

provide:

5

(1)  That the distribution system improvement charge

6

shall be applied equally to all customer classes as a

7

percentage of each customer's billed revenue.

8

(2)  A process to adjust the charge and to provide:

9

(i)  Credit to customer accounts for over collections

10

and collections for ineligible projects.

11

(ii)  Charges to customer accounts for under

12

collections.

13

(3)  A cap on the amount that may be collected from

14

customers under this subchapter.

15

(e)  Audit and reconciliation.--The following shall apply:

16

(1)  The distribution system improvement charge shall be

17

subject to the following:

18

(i)  Audit at intervals determined by the commission.

19

(ii)  Annual reconciliation based on a reconciliation

20

period consisting of the 12 months ending December 31 of

21

each year.

22

(2)  The revenue received under the distribution system

23

improvement charge for the reconciliation period shall be

24

compared to the utility's eligible costs for that period. The

25

difference between revenue and costs shall be recouped or

26

refunded, as appropriate, in accordance with section 1307(e)

27

(relating to sliding scale of rates; adjustments), over a

28

one-year period commencing April 1 of each year.

29

(3)  If revenues from the distribution system improvement

30

charge exceed eligible costs, the over collections shall be

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1

refunded with interest. Interest on the over collections

2

shall be calculated at the residential mortgage lending rate

3

specified by the Secretary of Banking in accordance with the

4

act of January 30, 1974 (P.L.13, No.6), referred to as the

5

Loan Interest and Protection Law, and shall be refunded in

6

the same manner as an over collection.

7

(f)  Complaint.--The distribution system improvement charge

8

shall be subject to complaint under section 701 (relating to

9

complaints).

10

§ 1359.  Projects.

11

(a)  Standards.--The commission shall establish standards to

12

ensure that work on utility systems to repair, improve or

13

replace eligible property is performed by qualified employees of

14

either the utility or an independent contractor in a manner that

15

protects system reliability and the safety of the public.

16

(b)  Inspection.--Projects for which work to repair, improve

17

or replace eligible property is performed by independent

18

contractors shall be subject to reliability and safety standards

19

and to inspection by utility employees.

20

(c)  Cost.--Work on projects to repair, improve or replace

21

eligible property that is not performed by qualified contractors

22

or inspected by the utility's qualified personnel shall not be

23

eligible for recovery of a distribution system improvement

24

charge.

25

§ 1360.  Applicability.

26

(a)  Acceptance.--The commission may accept a long-term

27

infrastructure plan filed by a water utility prior to the

28

effective date of this subsection in order to comply with

29

section 1352 (relating to long-term infrastructure improvement

30

plan).

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1

(b)  Submission.--The commission may require the submission

2

of a new long-term infrastructure plan by a water utility.

3

Section 7.  Section 3301(c) of Title 66 is amended to read:

4

§ 3301.  Civil penalties for violations.

5

* * *

6

(c)  Gas pipeline safety violations.--Any person or

7

corporation, defined as a public utility in this part, who

8

violates any provisions of this part governing the safety of

9

pipeline or conduit facilities in the transportation of natural

10

gas, flammable gas, or gas which is toxic or corrosive, or of

11

any regulation or order issued thereunder, shall be subject to a

12

civil penalty of not to exceed [$10,000] $200,000 for each

13

violation for each day that the violation persists, except that

14

the maximum civil penalty shall not exceed [$500,000] $2,000,000 

15

for any related series of violations, or subject to a penalty

16

provided under Federal pipeline safety laws, whichever is

17

greater.

18

* * *

19

Section 8.  This act shall take effect in 60 days.

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